How To Estimate Repairs When You Don’t Know Squat About Construction

When I started flipping houses, I didn’t really know squat about construction, the cost of repairs, cost of materials, what materials to use, the time it should take, who should do the work, etc…

I really was clueless when it came to this aspect of flipping houses, which can be a pretty big problem when you need to be able to figure out the cost of repairs in order to make an intelligent offer to buy a house. This was something I was going to have to learn in order to make it in this business without losing my shirt.

Good news. I haven’t lost my shirt. I’m still wearing it.

How to Estimate Rehab Costs!

Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.

How To Keep Your Shirt

…and possibly get a Hawaiian one. I get to that later in the article.

Yeah, there were times when I made mistakes. Times when I was getting into arguments with contractors and I honestly was not confident in my position. Those were awkward. But, I learned from my mistakes and didn’t let them stop me continuing on and becoming a successful real estate investor.

So how do we learn how to estimate repairs when we don’t know what the heck we are doing?

Let’s go through the steps necessary.

1. Find Someone That Does Know What They Are Doing

The quickest way to learn what repairs are normally necessary and what they should cost is to ask an experienced investor. Try and find a local rehabber that has been in the business at least for several years that rehabs several houses a year. If you cannot find one willing to help, you could always approach a contractor that works for such an investor. This way you will have a contact for someone that can do the work on your flip houses.

There are several ways to find these investors and contractors:

Your local REIA (Real Estate Investor Association) meeting

Driving neighborhoods and looking for rehabs taking place

Calling on their ads (look for ‘we buy houses’ type advertisting)

On the BiggerPockets.com forums (lots of helpful people there)

2. Give Them Something In Exchange For Their Help

Don’t expect people to take time out of their busy day to spend hours helping you for nothing. It’s not likely and you will probaby tick some people off. It’s best to know what you can offer them in exchange for their help before you ask.

Here are some ideas of things you can offer:

Treat them to lunch at a restaurant of their choosing

Offer to pay them for their time (per hour might be a good idea)

If you are planning on wholesaling, offer to send them your deals first

Offer to do some leg work for them (check on properties etc.)

3. Have Them Show You The Ropes

Once you’ve found someone with experience have them show you the ropes. If they don’t have a house that is run down available at the moment, set up a showing for a bank-owned property that needs a lot of repairs. Try to make sure the house is in the typical area you plan to invest in. This is important because the level of rehab is going to depend on the price range and your investment strategy.

Go through the house with your new coach and have them give the typical costs and rules of thumb for determining cost for every item in the house. Don’t skip something because the house you look at doesn’t need it. You want information on the costs for everything.

4. Keep Good Notes

Make sure that you take tons of pictures and write down everything he/she says. You might want to video tape the experience to catch everything.

Be prepared by having plenty of time (at least an hour or two) to cover everything in depth and ask a lot of questions. What may be obvious to them may not be obvious to you.

5. Visit the Home Improvement Box Stores

If you are going to be rehabbing the houses you buy, you should take a trip to the big home improvement stores. Find the materials that you will want to use and write down (or take pictures of) the item, the price, and the SKU number for each item.

This way you will know the cost of the materials you will want to use and will save you time. Before we did this, I wasted far too much time going to these stores to find one or two things. It was ridiculous. Once we made a spreadsheet of the items we would use, I no longer had to go back.

This really helps the contractors also. We have them bid labor and materials for the jobs and it’s best to tell them exactly (with SKU #s) what materials we want to use and what they will cost.

Don’t make the mistake I’ve made before where I didn’t specify exactly what to use. Get what they used? Yep, the cheapest of the cheap. It was horrible.

Conclusion

Now, when you go to look at that prospective house flip, you will have an idea of what the repair costs should be. If you have a question about an item or two, you can make a call to someone more experienced that can give you the answers you’re looking for.

Without this education, you really are at a huge disadvantage and are likely to lose your shirt on a house flip.

If you do well and flip enough houses to go full-time as a real estate investor, you can buy yourself a Hawaiian shirt. I don’t know if that is a common thing, but my wife and I noticed that all the full-time investors wore Hawaiian shirts. When I went full-time, she got me one.

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About Author

Danny Johnson (G+) is a real estate investor in San Antonio, TX. Visit his blog: Flipping Junkie – A House Flipping Blog to follow along with him as he shows, in detail, the marketing he is doing, the leads being generated, the lead and deal analysis, the rehabs and really, just about everything. He also provides real estate investor websites at LeadPropeller.com.

16 Comments

Danny, Thank You for a great article! From a newbie’s perspective, this article gives me some real knowledge and direction I didn’t have. I see how I can use your suggestions in so many ways, regardless of my exit strategy, WOW! We don’t know what to ask about what we don’t know, and you just gave me a path to accelerated learning. Also because you were candid about your mistakes I feel less pressure about making my own. Thank you!

That’s a really good list of tips especially for new investors Danny. Getting to the point where you have items you use all the time like vanities, light fixtures etc. is key to running an efficient business. Keeping that information in an easily accessible file like a spreadsheet is what every investor should be doing. Great post.

Danny, great information. I have been looking into fix&flip, and found this article helpful. I especially like staying with the same materials. Seems obvious once you hear it, but to a newbie its not.
Thanks,
Carolina

Thank you so much for this article! One of the things I am loving about this site is the transparency. I’m at the stage where I’ve dipped my toe in the water, but now I’m ready to just dive in. Of course I still feel like I have to learn a few more things before I get started. lol. I’ve wanted to do this, but the lack of construction knowledge made me fearful. After reading this I think it’s possible even with the little that I know. Thanks again, I will definitely be reading more from you. Have a wonderful day.

Yes, I firmly believe working with another investor in the beginning to help figure out repairs is the way to go. Even if you have construction experience, it’s great to get the perspective of another successful investor as there is a big difference in fixing a place up for you to live in versus fixing up for resale (regarding acceptable fixtures and finishes based on price range – NOT cutting corners and putting lipstick on a pig type repairs).